Call for investigation into ‘real reasons’ for W Cape’s LPG shortage
COMMERCIAL traders of liquefied petroleum gas (LPG) in the Western Cape have called for an investigation into the “real reasons” for the shortage of LPG in the province, which has rendered them unable to meet increased demand as the country was going into level 2 of the lockdown.
While speaking independently, the traders shared a common view that the province’s LPG crisis was created by some rather dodgy activity around Saldanha Bay, where two LPG importers are based.
“Avedia Energy operations were stopped, and we don’t understand why. And the Sunrise Energy operations are not consistent, as their multi-buoy mooring (MBM) is unable to handle certain weather conditions,” said a trader, on condition of anonymity.
Some of the hot-button issues raised by the traders were the inadvertent establishment of a monopoly at Saldanha with the acquiescence, or at least the quiescence, of the regulators; the different approaches of the regulators on this issue and that this monopoly had “fallen through the gaping hole” between them; and that the Competition Commission published a report in 2017 about the anti-competitive situation that existed in the LPG industry and no action had been taken on any of it.
The commission’s analysis, published in March 2017, found that the limited domestic production of LPG necessitated that imports be used to fill the gaps in the supply.
The commission also found that the inadequate import infrastructure had stifled the uptake of LPG. In particular, the commission found that significant obstacles were caused by the overlapping jurisdictions of National Energy Regulator of SA and the Transnet National Ports Authority (TNPA) in relation to approvals for the construction of import and storage facilities at the ports.
The managing director at Southern Energy Trading, George Tatham, said he supported the call for an independent investigation. “For this investigation to be credible, it needs to be independent because of the ‘illogical decisions’ and all the rumours of corruption.” He emphasised the need for the appointment of a lead regulator to deal with the anti-competitive structure in the LPG industry, particularly breaking the import monopoly and reviewing the poorly constructed price regulation of LPG.
Owner of Hermanus Gas Factory Stoffel Frick said he supported the call for an investigation into the shortage of LPG. “I have realised that the import of this product in this region is in a monopolised situation. We need an open market.”
Frick said the long-haul process of shipping LPG around Africa’s southern-most point and then transporting it back overland came at a huge cost.
On August 13, LPG traders received a force majeure from Vitol for the Sunrise LPG terminal in Saldanha, advising them that due to the malfunctioning MBM in the port of Saldanha, their vessel that was scheduled to replenish stock at the Sunrise import terminal would not able to berth.
“We have no choice, but to declare a force majeure,” reads part of the communiqué seen by Business Report.
Some traders said they were long-hauling supply from Port Elizabeth and KwaZulu-Natal in the interim, while others were not receiving the bulk product from Sunrise.
Efforts to obtain comments from Sunrise and Avedia drew a blank.
A TNPA “Review of Allegations of Non-Compliance to Policy and Legislation into the Quay Side Off Loading of LPG” report by Sekela Xabiso concluded that the TNPA seemed to be in cahoots with Sunrise.
The legal and compliance sub-committee of Transnet’s executive committee, at its meeting of June 5, 2019, considered the SKX Report and resolved to reject it in its entirety.